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BROCADE BAGS RHAPSODY NETWORKS
By Clint Boulton

In yet another demonstration that the data storage sector is an arms race in which major factions are snapping up startups to bolster their offerings, Brocade Communications Systems snapped up rival Rhapsody Networks for $175 million in stock.

Privately-held, Fremont, CA-based Rhapsody Networks and San Jose, CA's Brocade are makers of storage fabric switches -- devices that route a path or circuit for sending data to its next destination. Seen as complementary to Brocade, Rhapsody Networks' products will bolster Brocade's already stocked armory of fabric switch products as it attempts to offer an open platform for fabric applications. Rhapsody's products support multiple protocols, including Fibre Channel and IP, and is accessed through an open API. The API will be integrated with the Brocade Fabric Access API for the development of storage and data management applications.

With Rhapsody Networks under its belt, Brocade expects to create a new class of fabric application switches, which will be interoperable with its flagship Brocade SilkWorm family of Fibre Channel fabric switches.

Brocade will then work with leading OEM and application partners to create fabric applications, including fabric-based volume management, fabric-based data replication, and fabric-based data management. Brocade hopes the first fabric applications based on these platforms will be available from some OEMs by the end of calendar year 2003.

IDC analyst Rick Villars told internetnews.com he saw the acquisition as something Brocade's OEMs probably wanted within a certain time frame.

"Brocade decided the best thing to do was to go ahead and buy a company that could embed the virtualization capabilities into a network storage controller," Villars said. "Rhapsody already has a presence in doing this, so they're saving themselves some time."

Brocade's goal is aligned with most storage providers, who are trying to simplify the management of heterogeneous storage environments. The larger companies are well aware of the importance of hooking the smaller fish in the storage sector, where the attitude is trump or be trumped.

In September, Sun Microsystems bought Pirus Networks -- another switchmaker -- for an undisclosed amount of stock. Cisco Systems made a huge play for Andiamo Systems in August, shelling out about $2 billion for that switchmaker.

As for terms of the deal, Brocade will acquire all outstanding shares of Rhapsody in exchange for 23.4 million shares of Brocade common stock, equivalent to roughly 10 percent of outstanding common stock as of November 5, 2002.

Brocade expects the transaction to close in January 2003.